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FOMC Cheat Sheet

What is the FOMC?

FOMC stands for Federal Open Market Committee, a branch of the Federal Reserve System

Who is on the committee?

– President of the Federal Reserve Bank of New York
– 7 members of the Board of Governors
– 4 Reserve Bank Presidents on a rotating basis

Why do they meet?

The members meet to discuss national and global economic developments and their stance on monetary policies

When are the meetings held?

FOMC meets 8 times per year, every 6 weeks. They can meet more often should the need arises.


Can we spectate the meeting?

FOMC meetings are held in private. However, the minutes will be released 3 weeks after the meetings. You can find them here.

What are their tools?

– Open Market Operations (the buying and selling of securities in the open market by a central bank)
– Adjusting interest rates
– Determining reserve requirements

How can those tools be used?

For expansionary monetary policies

Open Market Operations
Buying more bonds in the open markets

Interest Rate
Lowering the rate when lending money to commercial banks

Reserve Requirements
Decreasing the amount of money that financial institutions have to keep at the reserve                           bank

All of the above actions will lead to more money flowing into the economy and thus stimulate economic activities

(The opposite is true for contractionary monetary policies)

Precautions

FOMC meetings are among the most highly-anticipated events since the financial implications are widespread. Thus, market volatility usually increases around these times.

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CPI Cheat Sheet

What is CPI?

CPI stands for Consumer Price Index


What is it for?

CPI examines the weighted average of prices of a bundle of consumer goods and services

It serves as an economic indicator that measures the inflation/ deflation faced by end-user & determining the purchasing power of the dollar 


What is included in the bundle?

80,000 items each month including food, energy, commodities, housing, healthcare, transportation etc.


How is data collected?

Governments spend significant resources to measure expenditure information accurately through targeted surveys


When is the report published?

The CPI reports are published every month


Are there any limitations of CPI?

  • It is a conditional cost of living measure that does not take every aspect that affects living standards into account
  • Unable to compare among different areas
  • It may not apply to all population groups 
  • Sampling error- The chosen sample might not represent the entire population accurately

How to read the CPI report?

The figure is based upon the index average for the period from 1982 and 1984. 

A reading of 125% means there is a rise in inflation level of 25% compared to the referenced period


Impact of CPI reports on trading

There are usually volatile movements if the actual figures differ from the consensus on a large scale.

If actual = consensus, then the markets may not react violently as they are already expecting that, and expectations were priced into the charts 

– Good for currency: Actual > Forecast


Related Information

What is inflation?

When there is inflation, the purchasing power of a currency weakens. Consumers can now only purchase a portion of goods and services that they used to, with the same amount of money.

The Fed has to meet their inflation mandate, and therefore will deploy monetary policy tools to achieve that.

One of them being adjusting interest rates. Interest rates are of huge significance to the economy as it directly affects how willing people and businesses are to borrow money. It also affects how valuable one currency is relative to other currencies.

Breadmaker

All Things Trading

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VPS: What is it and should I get one?


Trading with VPS has been gaining popularity recently in the retail trading communities and there are solid reasons why.

  • Ultra-Low Latency
    The main reason why traders sign up for VPS is their concern for latency and the impact on their bottom line performance. Network latency is a term used to describe the delay in communication over a network. It is the amount of time it takes for a packet of data to be captured, transmitted, processed, and then received at the destination and subsequently getting decoded.

When trading in the financial markets, even milliseconds can result in a different outcome. The price of instruments can move during the time when an order is placed and a position is triggered. The differences may seem minimal but they will amount to a huge figure in the long run.

  • Constant Connectivity
    With a complete virtual Windows desktop that can be accessed anytime, anywhere in the world, VPS ensures that Expert Advisors (EA) can be run continuously
  • Reduce Risks
    VPS removes the risks associated with running EA on a local machine

Traders do not need to worry about risks such as power outages, system crashes, and internet connection issues.

  • Greater Security
    VPS enhances safety in trading as well by removing loopholes for security breaches. The hosted servers are monitored constantly by dedicated personnel and are properly equipped with advanced antivirus software.

Here are some numbers for our reference 

Let’s say John is in Singapore and he is trading on his desktop. Whenever he places an order via his computer, the order is sent from his network to the broker’s trading servers, which most likely are located in data centers in either New York or London. 

The average time taken for the orders to travel from Singapore to London is 157.380ms, according to https://wondernetwork.com/pings/London/Singapore .

Singapore and London (10841 KM)

For comparison purposes, let’s have a look at the ping time between other locations and London.

Paris and London (343 KM)

Johannesburg and London (9403 KM)

There is a major difference in the ping time (more than 15 times) due to geographical location and the physical distance the information packet has to travel.

This is why a VPS (situated in close proximity to the trading servers) can be so useful in trading in terms of execution speed, not to mention the other benefits including safety and reduced risk.

There are numerous VPS providers out there but you have to pay subscription fees for different plans. The Good News is that FXPIG is currently offering free VPS* to traders. Contact your account manager to learn more about free VPS now!

*Terms and conditions apply

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Choosing a trading platform: MT4 vs cTrader

Are you new to the trading industry and have no idea which trading platform is best for you? Or are you a seasoned trader and want to explore new trading platforms?

We are going to learn about the key points to consider when choosing a trading platform in this article. Then, we will lay out the pros and cons of MT4 and cTrader, two of the most widely used trading platforms for retail traders.

A trading platform is a medium where traders can view charts, do technical analysis, get market data, place trades among other functions.

Point 1: Functionality

Functionality includes

  • the number of trading instruments available
    (some brokers may not offer certain instruments on certain platforms)
  • timeframes customizability
  • availability of technical indicators 
  • built-in economic calendar
    (both MT4 and cTrader have it)
  • algorithmic trading
    (EA on MT4 and cTrader Automate)
  • Community
    (The MQL community for MetaTrader and C#/ CTDN community for cTrader)

Point 2: User Interface

The interface is the most direct point of interaction between the traders and trading platforms. Thus, it is imperative to choose one that is easy to understand, practical to use and some even take the cosmetic design into account.

Point 3: Compatibility

If you are currently running Windows OS, then compatibility issues shouldn’t bother you as it is used by more than 87% of computer users around the world, compared to 9.5% for Mac OS and 2.35% for Linux. 

Some trading platforms only support certain OS, and you may need third party applications if you wish to run it on another OS that it does not support.

Point 4: Performance

Speed of execution is very critical for traders, and even more so for those that trade high frequency systems and the likes. A good platform executes orders with minimal lag. However, do bear in mind that many other factors affect the execution speed including but not limited to the network speed, types of connection, location between the servers and device hardware.

Comparing MT4 and cTrader

MetaTrader 4

MT4 has been in the industry since 2005 and it is still dominating the retail forex market. 

Pros of MT4

  • Beginner-friendly user interface
  • Huge library of pre-built indicators
  • Wide selection of automatic trading systems [Expert Advisors (EA)] available for purchase
  • A big community of traders/ programmers specialise in MQL4, the programming language of MetaTrader 4
  • Specially built smart trading tools (offered by FXPIG)

Cons of MT4

  • User interface looks outdated
  • Limited charting flexibility
  • Lack of advanced order types (can be solved by using smart trading tools mentioned above)

cTrader

cTrader is relatively new compared to MT4 as it was released 5 years after. It offers the best out-of-the-box trading environment compared to MT4. Not only that, but it is also an ECN trading platform.

Pros of cTrader

  • Modern and featured-packed user interface
  • Access to more market data (especially market depth)
  • More advanced charting capabilities
  • Advanced order type
  • Advanced cTrader Copy for copy trading

Cons of cTrader

  • Not many brokers offer cTrader
  • Lesser automated trading system for sale in the market

Verdict

Honestly, you can’t go wrong with either of them as they are both great platforms. Go with MetaTrader 4 if you are interested in the vast amount of EAs and indicators that are available in their store, and do not mind the outdated user interface. Opt for cTrader if you want a more modern-looking interface packed with functionalities, and access cTrader copy where there are tons of strategy providers that you can follow.

Open an MT4 account now!

Open a cTrader account now!

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What Happens to Bitcoin in December?

Bitcoin has historically had an uptrend in December. With the already massive 98% gain year-to-date, will we see yet another uptrend in December 2021? 


Let’s address the chunky elephant before we start — Bitcoin is down about 13% from its highs of $68,521. 

We’re at the level some finance guys would even consider it a “crash”. Truthfully, Bitcoin has seen better days, but let’s not forget, not many better years. 

It’s still up about 98% from the start of the year — that’s a few percentage points more than any traditional assets. And we all know that’s an understatement. 

Now that we’re at the last stretch of the year, we’re edging closer to the phenomenon repeatedly seen over the past years — A Christmas Bump — a period leading towards January where it’s common to see Bitcoin on an upward trend. 

Bitcoin, 1 December 2016 to 31 December 2016

Bitcoin, 1 December 2017 to 31 December 2017

Bitcoin, 1 December 2018 to 31 December 2018

Bitcoin, 1 December 2019 to 31 December 2019

Bitcoin, 1 December 2020 to 31 December 2020

As of 3 December, Bitcoin is up about 98% year-to-date and it’s looking similar to 2016, 2017, 2019, and 2020. Out of these four years, three of them had their trend continue into December, adding on to the year’s gains. 

The reasons for this speculation aren’t arbitrary either. It’s a combination of multiple elements that enables this month to greatly outperform other months. And for this year, it is looking just as promising as the positive catalysts line up. 

So, who’s buying them? 

Retail Market

For the past few years, Bitcoin’s explosive moves in November have made it an unmissable topic at the Thanksgiving dining table. Adding to this is the fact that Bitcoin has grown at an unprecedented rate each year, dwarfing almost every other traditional asset. 

On top of that, with the help of influential people like Elon Musk and the constant buzz created by headlines with a grandiose three-figure percentage return in a year, the Internet is now plastered with talks around cryptocurrencies. 

Everyone has heard of this term by now, but only a few are invested in them. 

For those that are not invested, hearing these figures tends to incite a certain emotion in them. “It should have been me”, “It could have been me”, and “It would have been me if I had….” 

Translated, this is something traders and investors know all too well but is only ever clear in hindsight — FOMO — the fear of missing out on something even greater. 

Being able to notice this among other traders or investors is almost always a buy indicator, as what comes next is a wave of buyers coming into the same asset (Bitcoin) at the same time. In this case, giving the last month of the year a final push before heralding the new year’s.  

Institutions

Just a few years ago, transacting in Bitcoin is considered a laughable notion. 

“It’s too volatile” has become a phrase we’ve become too familiar with. But over the past year, fueled by the economic effects of the COVID-19 and controversy revolving around Robinhood and GameStop, sophisticated investors have begun to look for an alternative. 

One of which is Bitcoin. 

What followed suit was the assemblage of companies that also wanted to be involved. These companies are Microstrategy, Tesla, Square, and Coinbase. Together, they have over $12 billion invested in Bitcoin. 

Not just the acquisition of Bitcoin and owning it for the sake of owning it or storage of value, but more and more companies are looking to have an integrated crypto payment system. 

Twitter ($TWTR), had introduced their tipping feature, which includes using cryptocurrencies to their platform. Analysts are betting their money on Amazon to include cryptocurrencies as a payment method. And Facebook’s Novi, a digital currency wallet, is rather obvious proof that they’re working on it behind the limelight. 

Combining the fact that companies are buying Bitcoin as a storage value and building the technologies that enable their crypto transactions, leads to more demand for cryptocurrencies. From both the institutional side and, eventually, the retail side. 

Countries

Not even a decade back, all the talks were about how much gold does a country has. Today, presidents take it to Twitter to express their thoughts on Bitcoin and inflation. 

Oh, what a world we live in! 

The country that has been at the forefront of all of these is, of course, El Salvador. Their president, Nayib Bukele, has almost become a celebrity in the Crypto Twitter community because of his tweets around ‘buying the dip’ every time Bitcoin sees a price drop. As of the latest, El Salvador is reported to have over 1000+ Bitcoins in its reserves. 

Though El Salvador is the only country with Bitcoin as a legal tender, there are more than a handful of other countries already in talks about doing the same thing. Paraguay, Panama, Brazil, Mexico, and Argentina, just to name a few. 

The biggest reason why giant tech corporate’s and countries’ decisions make a difference is that they are the parties that will ultimately herald the mass adoption of cryptocurrencies. And with the amount of money these parties have compared to retail buyers, it is something to keep an eye out for. 

Spot Crypto ETF

One of the biggest themes that sent Bitcoin on an upward trajectory this year was the notion of having a crypto ETF. But the SEC, the U.S. Securities and Exchange Commission, has said no over and over again. And then the news of an ETF that involves Bitcoin hit the streets. This was the ProShares Bitcoin Strategy ETF, otherwise known as $BITO

But investors who were anticipating this event were quickly disappointed as they realised this is only a Bitcoin Futures ETF, not a Bitcoin Spot ETF. In simple terms, a Bitcoin Futures ETF does not directly track Bitcoin’s prices, and it’s not ideal to hold as a long-term investment due to its high cost. Speculators even highlighted that the SEC only approved this ETF due to its nature of being a futures investment. 

On 2 December, painted all across the biggest financial publications, is the news that Fidelity is set to launch a cryptocurrency ETF. What’s, even more, is that it’s reported to be a spot ETF. The caveat is, this will be launched on the Toronto Stock Exchange, so not exactly available to US investors directly. 

Regardless, having a top-tier fund manager launch an ETF that is directly involved with the underlying asset is, in most perspectives, a big win for Bitcoin and the cryptocurrency space as a whole. 

Closing Thoughts

It’s arguably irrefutable to say Bitcoin has had an eventful year, and along with it, the entire crypto industry. But even with all that is happening and JP Morgan’s prediction that Bitcoin will hit $146,000 in the long-term, it is not to say it won’t keep performing the nose dive stunt and trigger all the stop losses while at it. Heck, maybe even giving President Nayib Bukele yet another opportunity to paint Twitter with his thoughts on buying the dip. 

But with our data and the news coverage around this, it is more than likely that we will be seeing the Bitcoin charts reaching for the top right corner of your screens. 

If you’re looking for access to a 24/7 crypto market, check out FXPIG for up to 60 crypto CFDs. 

*Get a free upgrade to a Pro account by including “Crypto” in the promo code when you sign up. Terms and Conditions apply. 

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None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.

FXPIG does not take into account your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by FXPIG. FXPIG also does not guarantee that such publications and information are up to date, accurate or applicable in any particular circumstances.

Any expression of opinion is personal to the author, and the author does not warrant the accuracy or completeness of any information or analysis supplied.

The authors and FXPIG are not responsible for any loss arising from any investment based on any perceived information contained here. The contents of these publications should not be construed as an express or implied promise, guarantee or implication by FXPIG that clients will profit or that losses in connection therewith can or will be limited, from reliance on any information set out here.

Trading on margin (spread betting, CFDs and FX) carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade your live account, you should carefully consider your investment objectives, level of experience and risk appetite. You could lose more than your initial investment and should not trade with funds you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any doubts.

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Fibo Rules

Fibonacci is a huge subject and there are many different Fibonacci studies with weird-sounding names but we’re going to stick to two: retracement and extension.

Few days ago my brother overheard me talking about the market and when I mentioned Fibonacci levels, in awe and surprise he almost yelled at me – What does Fibonacci has to do with your Forex, that is architecture!!!

So, for the sake of the peace in the world, let us first start by introducing you to the Fibo man himself…Leonardo Fibonacci, the king of the Castle!

No, no, he was not a king literally, and I doubt he had a castle, though his father was quite rich; and he is not some famous Italian chef, though he may sound like Pizza to you. You got partially right, he was Italian, and actually born in Pisa, but, he was a famous Italian mathematician, so, known as a super-duper uber ultra geek.

He had an “Aha!” moment when he discovered a simple series of numbers that created ratios describing the natural proportions of things in the universe. I had my “Ahaaaaa!” moment when I realized that his “Aha!” actually works.

The ratios arise from the following number series: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…

This series of numbers is derived by starting with 0 followed by 1 and then adding 0 + 1 to get 1, the third number.

Then, adding the second and third numbers (1 + 1) to get 2, the fourth number, and so on.

After the first few numbers in the sequence, if you measure the ratio of any number to the succeeding higher number, you get .618.

For example, 34 divided by 55 equals .618.

If you measure the ratio between alternate numbers you get .382.

For example, 34 divided by 89 = 0.382 .

Well, now, that is way too serious. You can kill an elephant with all those numbers, though I don’t really see a point in killing an elephant. No one should kill an elephant for any reason.

Fibonacci Sequence

Back to the Fibo guy, enough elephants.

Fibonacci sequence is formed by taking 2 numbers, any 2 numbers, and adding them together to form a third number.

Then the second and third numbers are added again to form the fourth number.

And you can continue this until it’s not fun anymore… And the fun never ends, so don’t…  You should be trading, not adding numbers.

The ratio of the last number over the second-to-the-last number is approximately equal to 1.618.

This ratio can be found in many natural objects, so this ratio is called the golden ratio.

It appears many times in geometry, art, architecture, nature.

I have trillion more images to show that Fibonacci is everywhere, though some of them even I  personally don’t like seeing, like Sonic the Hedgehog, which I still don’t understand how came to obsess my nephew.

And where is Forex in all this?!

Didn’t I say Fibonacci is everywhere?

Fibonacci retracement levels work on the theory that after a big price moves in one direction, the price will retrace or return partway back to a previous price level before resuming in the original direction.

Traders use the Fibonacci retracement levels as potential support and resistance areas.

Haters my say since so many traders watch these same levels and place buy and sell orders on them to enter trades or place stops, the support and resistance levels tend to become a self-fulfilling prophecy.

Traders use the Fibonacci extension levels as profit-taking levels.

Again, word is that since so many traders are watching these levels to place buy and sell orders to take profits, this tool tends to work more often than not due to self-fulfilling expectations… But, as long as it works, who cares why ?

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